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Politics : Politics of Energy -- Ignore unavailable to you. Want to Upgrade?

To: Road Walker who wrote (24859)	1/16/2011 12:01:45 AM
From: russet	3 Recommendations Respond to of 86354

All companies can deduct expenses before calculating taxable income. The oil industry is no different from any other. If expenses are subsidies then there elimination would put most businesses into bankruptcy if tax rates stay as high as they are now. What subsidy is given one year in advance of drilling? That would have to be a government grant, like the ones being given to companies that manufacture solar panel components in the U.S. that then move the facilities to China to take advantage of cheaper labor, labor that is treated like an expendable input, lax or non existent environmental standards and huge tax and grant subsidies from local governments. Rich people all over the world take advantage of tax schemes of local governments to encourage development of their natural resources to provide jobs and infrastructure for local communities. The oil industry is no different than any other industry in this regard either. But if we hadn't developed the fossil fuel industries in the last 100 years, we'd probably all be dead now instead of reading on a computer (that owes its development and manufacture to the resource and fossil fuel industry) how some people don't understand the tax system.

To: Road Walker who wrote (24859)	1/16/2011 7:57:18 AM
From: Brumar89	Read Replies (1) \| Respond to of 86354

Allowable expenses can only be deducted from taxable income. You would still pay taxes on $700,000. Yeah ANY taxable income. Even another business. Ya think very rich people dont .... Of course, deductions from oil & gas investments can be deducted from income earned in something else. Thats true of all investments and perfectly legitimate. How does the IDC differ conceptually from allowing a company to expense the cost of new computer equipment in year 1 instead of capitalizing the cost and taking depreciation expense over a period of years. Conceptionually? This has nothing to do with conception it has to do with accounting. I believe his point was point there are similar tax advantages for other non-oil & gas investments. For example: Current-year Deduction of Research & Development Expenditures irs.gov .... Today, the expense of developing software (whether for a gourmet retailer's own use or for sale to others) may either be deducted currently or amortized over a five-year period — so long as such costs are treated consistently. Purchased software, which cannot be characterized as an intangible asset acquired as part of a business acquisition, is usually depreciated using the straight-line method over three years beginning in the month that it is placed in service. ..... allbusiness.com First, it's a permanent subsidy, vs a rare and sporatic subsidy. It's law. The oil industry is treated differently than any other. Not really. The mining industry, for example, has a similar current year tax deduction for mine development costs. And as already pointed out there are similar current deductions for certain expenses in other industries. Second, it's one year, in advance of drilling. That's simply incorrect. Third, it attracts capital strictly for tax avoidance. No, the idea in drilling is to make money. Just as in the venture capital industry.

To: Road Walker who wrote (24859)	1/16/2011 11:28:57 AM
From: Alastair McIntosh	1 Recommendation Read Replies (1) \| Respond to of 86354

I replied to this line in your post 24832: Most are in the form of tax benefits, such as the deduction for “intangible drilling costs” (labor, repairs, hauling, you name it) in oil exploration—a notoriously abused provision of the tax code. To put these costs in perspective, suppose that Company A has Intangible Drilling Costs of $1,000,000. Suppose that Company A decides to take this expense in year 1 rather that spread the cost over 5 years. What is the cost to the taxpayer if the drilling company has a marginal tax rate of 40% and government borrowing costs 4%. For extra marks estimate the benefit to the taxpayer if several extra jobs and a producing oil well are created producing addition tax revenues and reducing imported oil.